Is exec pay shortchanging your company?

Published: November 5, 2010

Now that some of the dust has settled on Mark Hurd's resignation as CEO of Hewlett Packard, it's worth another look, not because of the scandal, but for what we might learn.Hurd resigned Aug. 6 after an investigation into a sexual harassment claim revealed "improper" expense accounting. It seems he was using a former soft-porn actress as a contract employee to organize and run VIP events. An affair has not been proven nor has the sexual harassment charge, but Hurd apparently felt enough pressure to hide expenses, despite having made as much as $34 million in one year.Hurd joined HP in 2005 after the firing of Carly Fiorina. He has become a Wall Street darling, credited with rejuvenating the company, dramatically increasing sales and the stock price as well.Depending on how you do the accounting, however, he's credited with laying off over 65,000 people. He even imposed a 5 percent pay cut on all employees, taking the cut himself, but he more than made up for it in bonuses. Employee benefits also took a severe beating.In my opinion, laying off all those people is not worth millions of dollars in compensation. Anybody can lay off staff - your comptroller tells you how many people, and the order goes out.What might have been worth all those millions is a CEO who could have figured out how to productively and profitably use those people. Can you imagine where HP's stock would be today if that were the case?People vs. processCertainly the stock price got better, but how much better would it be if HP's board had hired someone who built on the resources instead of just jettisoning them?No sooner was Hurd ousted than he had multiple job offers. He took the one from his friend Larry Ellison at Oracle Corp. Just how long do you think it will be before we see layoffs at Oracle in Nashua?Now, HP is suing Hurd. Maybe I'm nitpicking here, but tying compensation to performance sounds like a great idea, but all it gets you is a self-serving CEO.If you're getting rid of someone because you can't trust him, does it really make sense to think he would honor a severance agreement?The soap opera gets even better. HP has stunned many by hiring former SAP CEO Léo Apotheker as Hurd's replacement. I thought they would try to find another Hurd type without a scandal, but it seems Apotheker already has a few skeletons in his closet with SAP not renewing his contract after serving as its CEO for just a few months and Oracle's bitter intellectual property suit against SAP.Hurd is not the first to hurt thousands of lives and careers just to earn a better bonus. Remember "Neutron Jack" Welch of GE?It seems Hurd learned one of Welch's tricks, cutting R&D to make present results look better. But what about the future? That's suicide in just about every industry, but especially in high tech.The really sad thing is that HP's board has set themselves up for another round. The compensation package will probably be similar, but how will this next CEO fail?How about your company? Are you doing the same thing over and over, hoping for better results? If you keep hiring the wrong people, there's something wrong with the process.Ronald J. Bourque is a consultant and speaker from Windham who has had engagements throughout the U.S. and in Europe and Asia. He can be reached at 603-898-1871;RonBourque@myfairpoint.net; or bourqueai.com.

This article appears in the November 5 2010 issue of New Hampshire Business Review